Our View: A costly power play with Brayton Point?

New England's highest-in-the-nation electricity rates could nearly double in three years with the expected closure of Somerset's Brayton Point Power Plant. Now, federal officials are trying to determine whether the plant closure and Brayton Point's withdrawal from the regional energy rate auction for 2017-18 is a case of pric...

New England’s highest-in-the-nation electricity rates could nearly double in three years with the expected closure of Somerset’s Brayton Point Power Plant. Now, federal officials are trying to determine whether the plant closure and Brayton Point’s withdrawal from the regional energy rate auction for 2017-18 is a case of price manipulation or just a case of cheaper natural gas and environmental regulations making the plant a losing business proposition, as the plant’s owner contends.

Given suspicions resulting from the questionable timing and circumstances leading to the plant’s withdrawal from the energy auction, it’s important for federal officials to get to the bottom of it before signing off on the auction.

Soon after Energy Capital Partners purchased the coal-powered plant in September, it announced its intentions to close the plant — one of New England’s largest energy producers. Just a week before the region’s energy grid, ISO New England, held its auction in February to determine electricity supply and rates for 2017-18, the company announced it was withdrawing Brayton Point from the auction.

That automatically “triggered administrative pricing rules that would increase the cost of energy” to consumers, according to U.S. Rep. Joseph Kennedy III, who is pushing for the review. Three organizations — Public Citizen, Conservation Law Foundation and UWUA Local 464 — filed motions with the Federal Energy Regulatory Commission objecting to the auction. So, too, did the Connecticut attorney general and the New Hampshire Office of Consumer Advocate. Massachusetts and Rhode Island have not challenged it. Some have applauded the “dirty” power plant’s pending closure, citing health and environmental concerns from its pollution.

On Friday, FERC determined that the auction was “deficient” and held off on approving that ISO auction pending the supply of additional compliance information to determine whether price manipulation was a factor. Energy Capital Partners owns several power plants in the region, four of which were included for a total of 1,624 megawatts of capacity combined. The 1,530-megawatt Brayton Point Power Plant — with nearly enough capacity of those four other ECP plants combined — was not included.

According to Kennedy, as a result of the increased prices from that auction, ECP can rake in an additional $77 million in 2017-18. Kennedy, based on conversations with local officials and industry experts, has questions about ECP’s announcement weeks after buying the plant that it would be closing the plant in 2017. ECP bought the Somerset plant in September as part of a three power plant package sold by Dominion for a combined $474 million.

Between 2009 and 2013, Dominion spent $1.1 billion in an environmental retrofit for the plant that resulted in the giant cooling towers. Since ECP stands to benefit from the higher energy costs, regulators have a responsibility to look into the circumstances surrounding ECP’s purchase and the sudden decision to close the plant and withdraw it from the auction.

Page 2 of 2 - The closure of Brayton Point will be a huge loss to the town of Somerset’s tax base and the local economy. Already, ECP has cited the closure in its completion of a tax agreement with the town to pay significantly lower taxes through June 30, 2016. Brayton Point’s closure will also have ripple effects throughout the region when it comes to the cost of the region’s power, which could devastate consumers and further drag down an already struggling economy.

Given the questions surrounding the process, it is important for federal officials to give the matter due diligence before approving the results of this auction. FERC’s information request should help clarify, as Kennedy said, “the process and events leading up to the auction ... and the impact it could have on local ratepayers.”

There are clearly market and regulatory factors resulting in the retirement of many of the nation’s coal-fired power plants. The loss of capacity will necessarily hike energy prices as plants go off line. But companies that stand to benefit from higher energy prices must not be unchecked in determining that supply. If it is determined that any price manipulation schemes from ECP came into play, regulators have a responsibility to reject the auction, protect consumers and the integrity of the nation’s energy supply, and hold those responsible accountable.